- Some employers have granted allowances, reimbursements and even assets to employees to meet these requirements. However, some are yet to provide any such assistance.
- In cases where the employers have granted allowances to meet these additional expenses, the allowances are taxable in the hands of the employees because of the lack of specific exemptions in the tax laws.
- Government could consider granting a deduction up to a specified limit, based on the spending or an additional standard deduction for all employees working from home.
The convenience of working from home have also brought along additional expenses for employees, such as investment in high-speed internet, power back-up, setting up a home-office requiring work chairs and desks, electronic accessories, air conditioning etc. to maintain efficiency. Some employers have granted allowances, reimbursements and even assets to employees to meet these requirements. However, some are yet to provide any such assistance leaving the employees to bear the additional costs of working from home.
In cases where the employers have granted allowances to meet these additional expenses, the allowances are taxable in the hands of the employees because of the lack of specific exemptions in the tax laws. Only in cases where the employer has reimbursed the cost of the assets bought by the employees or has supplied the assets itself, there is a possibility of claiming non-taxability. Further, such a claim can only be made provided adequate documentation/ safeguards are in place and necessary precautions have been exercised by the employer in reimbursing costs or providing these assets.
What the insurance industry wants from Budget 2021
Budget ideas for health, life insurance
(Based on text by ET Bureau)
All eyes are on Finance Minister Nirmala Sitharaman as the economy and the mood of the entire nation need solid uplifting in the aftermath of Covid-19 and its ill effects on the health and wealth of many. Juggling between the fiscal damage and expectations of taxpayers, the government finds itself in a not-so-sweet spot.
Various sectors and industries are expecting goodies too. The insurance industry is also making its suggestions out loud to the FM. One suggestion/expectation is a higher deduction for medical insurance premium as this will encourage people to buy sufficient cover for themselves. Hospital bills of Covid patients indicate that even a Rs 10 lakh cover may fall short. Here are other ideas from insurance experts for this year's Union Budget.
There are several additional expenses that employees have to incur because of working from home such as footing higher electricity, telephone and internet bills due to increased usage. The employees may have to spend additionally on refreshments, which would have otherwise been provided by the employer. There may be a need to use air-conditioners during summer or heaters during winter - this would again lead to employees incurring additional expenses - all of which they would otherwise not have incurred, but for working from home. On the flip side, employees will also save money on travel to office, formal attire etc.
While self-employed professionals can claim a tax deduction for expenses incurred by them in rendering services - be it working from home or office, there is no such option for salaried employees. Unfortunately, the current situation created by the pandemic was not envisaged and our tax laws do not provide for any specific deduction for the additional expenses that employees incur while working from home. However, it is time that the government takes into account the additional burden on the employees and provide for deductions or exemptions for these additional expenses.
Governments in other countries are recognising the additional costs being incurred by the employees to work from home and have taken steps to alleviate the employees' burden. For instance, in the UK employees can claim tax relief for additional household costs based on their spending and the applicable rate of tax. The Canadian government has also allowed a maximum deduction of CAD 400 for 2020 for home office expenses.
Further, it is highly likely that remote working will continue to be the norm till the pandemic subsides and in some form continue in the long run. Considering all this, the Indian government could consider granting a deduction up to a specified limit, based on the spending or an additional standard deduction for all employees working from home. With the union budget drawing close, it is not unreasonable for expectations to be high that an additional deduction/ exemption be allowed to employees to meet the expenses incurred while working from home.
(Amarpal S. Chadha is Partner - People Advisory Services, EY India. Sreenivasulu Reddy, Director - People Advisory Services, EY India also contributed to the column. Views expressed are personal)
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4 Comments on this Story
Rajesh Raje39 days ago
A civilized society must pay takes is admitted but use of tax money prudently without leakage is the responsibility of Govt. It is very painful to note that less than 10 % of population who represent politicians, bureaucracy, criminals and business fraternity ( exceptions ruled out) are misusing tax payers money for personal gain making mockery to system which boasts improvement in arresting leakage. U take 90% fraternity of politician, bureaucrat and business men , a careful unbiased enquiry can open pandora box of deep rooted corruption and nefarious acts. Kitne aye kitne chale gaye but corruption aur benami sampatti ye corrupts banata gaya. Govt cant do anything as 90 % of politicians as law makers are themselves corrupt. It is only 90 % honest population in which taxpayers have to bear the burn by coughing more and more tax.
varadharajan balasubramanian39 days ago
stealing a coconut from a shop on the road side to offer it to the lord Ganapathy is what the Government doing in the budget. The money that goes to the freebies are not from the pockets of Politician or Government, but it is from the hard earned money from middle class and poor people of India.
Sanujit Roy39 days ago
Pandemic resulted in new way for working which have changed working model followed in last 50 years